Here’s Why the Bull Market is NOT Over…

Marc Lichtenfeld
by Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Here’s Why the Bull Market is NOT Over…

It’s hard to argue with someone who just won’t see the facts for what they are.

Over the weekend, I was talking to an acquaintance about the stock market. He said he didn’t believe we were in a bull market.

“The stock market has doubled in three years!” I said incredulously. “What more proof do you need?”

Apparently a lot more. The person pointed to high unemployment, gas prices soaring above $4, and every other negative in the economy and geopolitical scene that you can point to as a reason not to own stocks.

And that’s just fine with me. The more doubters we have, the more likely the market is going to run up. I’m going to start getting worried when people are extremely bullish and talk at cocktail parties revolves around the stock market.

Here’s why I believe the market still has legs:

  • Headlines – I’m still seeing headlines about market corrections, the market going up too much too fast, etc. On Sunday, the Financial Times had a story titled “Wall Street Braced for Hit to Soaring Markets” chronicling analysts’ bearishness. Let them be scared. When was the last time those analysts made anyone money, anyway? When those headlines become bullish, I’ll get worried.
  • Wall Street “Experts” – The market has already topped the expectations of most Wall Street strategists. At the beginning of the year, the average forecast was for the S&P to hit 1,363 by the end of the year. The highest target price was 1,515. Goldman Sachs’ U.S. Equity Strategist said last week that he’s sticking with his end of the year forecast of 1,250 for the S&P 500.
  • The “fear” trade is over – We’re seeing bonds and gold head lower. These are investment vehicles people buy when they want safety. They’re rotating out of these assets and are putting them to work in stocks. The market is sending a very clear message that the panic of the past few years is finished.

I’ve said this many times before – the market is a forward-looking mechanism. Over the past few years, as stocks were heading higher, even when the economic picture was still bleak, I told you that stocks were telling us things were going to improve.

And while unemployment is still too high, things are much better. Joblessness has dropped from 9.9% at its recent high to 8.3%. Underemployment, which includes part-time workers who want full time jobs and people who have stopped looking, is at a three-year low at 14.9%.

Sales at restaurants were up 8.7% in February, indicating people feel more comfortable with their financial picture. Personal income was up 5.1% in 2011 and personal savings rose 4.6% in January, suggesting that Americans have more money in their pockets now than they have had over the past three years when both of those figures were declining.

Business is picking up all over. Try to get into a decent restaurant these days. They’re packed. Revenue in Las Vegas was up 29% in January. When was the last time you had an empty seat next to you on an airplane? My conversations will realtors all indicate a significant pick up.

Are things perfect? Absolutely not. There are still people hurting and businesses that are struggling. And although the problems of the past few years were very real and significant, this time wasn’t different, and the economy and markets rebounded like they always have.

I suspect there’s plenty of upside left in this market. I expect us to hit the recent highs in the S&P 500 of 1,576. Strong stocks like Apple (Nasdaq: AAPL), Las Vegas Sands (NYSE: LVS) and Qualcomm (Nasdaq: QCOM) should continue to lead us there.

Good Investing,

Marc Lichtenfeld

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A 231% Gain on EPD Calls

In today’s article, Marc mentions Las Vegas Sands (NYSE: LVS). He also mentioned it in an article about casino/gaming stocks back on February 22. Since then, LVS is up about 8%, not including a $0.25-per-share dividend.

But Marc originally recommended the stock through his supercomputer-driven trading service, Oxford Systems Trader, way back on January 13. Since then, the stock is up a whopping 26% and still looks to be headed higher.

Another one of Marc’s recommendations in Oxford Systems Trader was Enterprise Products Partners (NYSE: EPD). But not only did he recommend the stock, he recommended June expiration call options at $46. The stock up 15% from the time he recommended it in December (not including dividends). However, he’s managed a 230% gain on the options. EPD has gained roughly 2% since we recommended it in Investment U Plus first back on February 9.

But with a solid dividend and the fundamentals to match, Marc still thinks the MLP is headed higher, and here’s why:

Enterprise Products Partnersis a master limited partnership (MLP) that has over 50,000 miles of pipelines and storage capacity of 192 million barrels of natural gas liquids and oil. It also can store up to 27 billion cubic feet of natural gas.

“Enterprise came up on S.T.A.R.S for reasons including its dramatic increase in book value per share in the past year. Its current book value is $13.35 per share versus just $3.16 last year. Enterprise also improved its return on equity (ROE) to 13.80% from 2.84% last year and is well above its five year average of 5.58%

“The company is one of the largest energy MLPs with significant exposure to key shale regions in Pennsylvania and Texas.

“Between 2010 and 2012 the company is putting $5 billion to work in projects, all of which will be online and producing cash flow by the end of 2012.

“We are entering the position based on S.T.A.R.S. recommendation and my analysis (both fundamental and technical) that the stock should go significantly higher. However, while we’re waiting, we will get paid a dividend of $2.45 per share annually, for a yield of 5.4%.

“But make no mistake about it: While the dividend yield is nice, we’re in the stock for a trade, one that I expect to exit with a nice gain.”

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